The Heart of the Matter

21

What lies at the heart of all fraud is the desire to enrich one’s own life at the expense of others. In an elaborate and sophisticated tax fraud scheme, a restaurant owner in Arizona used illegal aliens and the federal government to amass a net worth of $2 million.

The female restauranteur began her business, which had five locations in the Phoenix, Arizona area, with her husband. After their divorce, as owner and operator, she was responsible for the company’s financial decisions including employment, payroll and tax filing matters.

Her elaborate tax evasion scheme involved hiring illegal aliens whom she helped smuggle into the country to work at her restaurants. She apparently paid her employees’ smuggling fees, then required them to repay her by working long hours in her restaurant. (They were paid in cash, but their salary was below minimum wage, no taxes were withheld, and she did not pay overtime.) 

By the time authorities caught up with her, she had failed to pay more than $288,000 in taxes to the Internal Revenue Service (IRS) and nearly $90,000 to the Department of Labor to cover the wages for the illegal aliens. (She admitted to keeping the undocumented workers off her books because she wanted to cut down on payroll expenses.) 

The female restauranteur’s lawyer offered a variety of reasons why she made poor decisions involving her business to include her divorce, being a single mom while running a business, depression following an unsuccessful relationship with a partner who helped her run her business, and her 101-year-old mother who has dementia. The judge determined that she just didn’t fail to pay her taxes – her scheme to defraud the undocumented workers and the government was deliberate. (That may have had to do something with the fact that her smuggling and tax filing conduct, or lack thereof, continued over 20 years.)

The 56-year-old was sentenced to a year and a day in prison. She was ordered to pay $378,210.86 in restitution between the IRS and the Department of Labor.

This woman was a true fraudster in the sense that she ran her business in a manner that involved victimizing others through her smuggling activities and employment practices. However, the efforts to conceal her hiring practices and avoid paying taxes were not successful in the end. Government investigators got down to the heart of the matter in this case – she was just plain greedy.

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Human trafficker gets one year in prison for failure to pay taxes, wages,” published by Sonoran News on October 24, 2016.

PHOENIX – On Oct. 17, 2016, Isamary Diaz, 56, of Phoenix was sentenced to 12 months and one day in federal prison with one year of supervised release for failure to file accurate tax returns in order to cover up the fact she was employing illegal aliens she helped smuggle into the country to work in her five Phoenix area restaurants.

Diaz then exploited those employees by not paying them the federal minimum wage.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.